HAMILTON CITY COUNCIL S 2017/18 ANNUAL PLAN

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1 HAMILTON CITY COUNCIL S ANNUAL PLAN

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3 CONTENTS FROM THE MAYOR AND CHIEF EXECUTIVE YOUR COUNCIL OUR FINANCIAL STRATEGY FINANCIAL STATEMENTS PROSPECTIVE NOTES TO THE FINANCIAL STATEMENTS CAPITAL PROJECTS COUNCIL FUNDING IMPACT STATEMENT ANNUAL PLAN DISCLOSURE STATEMENT HAMILTON CITY COUNCIL S ANNUAL PLAN 1

4 FROM THE MAYOR AND CHIEF EXECUTIVE We are pleased to present Hamilton City Council s for. The Council produced its 10-Year Plan in 2015, which set out our priorities and budget for the next decade. The presents year three of that plan, updated to reflect changes made since The financial strategy we introduced in 2012 has put Hamilton City Council in a much better financial position than we were in six years ago. However, the costs to run the city are increasing and this is exacerbated by Hamilton s unprecedented growth. The for aims to strike a balance between controlling costs and embracing growth, while continuing to deliver projects that make Hamilton an even greater place to live. Key projects for include: significant investment in water supply, stormwater and sewerage networks significant investment in transport networks including development in Rototuna and Rotokauri and completion of the Hamilton Ring Road continuation of the Hamilton Gardens Development Programme additional investment in River Plan projects and Victoria on the River accelerating investment in sports parks in Rototuna the introduction of a free parking trial designed to help revitalise the CBD. In the next year, using our balancing the books measure, we are forecasting a break-even operating budget. Our measure includes the money we expect to receive from development contributions. Using the Government s balanced budget measure, which excludes development contributions, we are forecasting a significant deficit that is, the money collected to run the city won t cover the costs. The Council has kept to the 3.8% average rates increase originally forecast in the 10-Year Plan, but the finances are very tight. We will need to make some tough calls in the year ahead about what it will take to be financially sustainable over the next decade and how we measure that. This will include determining the best way to conservatively measure the Council s operating performance. But these are exciting times for Hamilton; we are growing much faster than we originally predicted and more people are looking to move here every day. How and where we cater for that demand will be a key topic of debate this year, including how we fund it. We believe this continues the positive momentum of the past few years in building a stronger economy and a more attractive city for families, while setting a solid platform for the big decisions ahead. 2 HAMILTON CITY COUNCIL S ANNUAL PLAN Andrew King Mayor of Hamilton Richard Briggs Chief Executive

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7 YOUR COUNCIL Andrew King MAYOR OF HAMILTON Martin Gallagher DEPUTY MAYOR Mark Bunting COUNCILLOR: EAST WARD James R Casson COUNCILLOR: EAST WARD james.casson@council.hcc.govt.nz Garry Mallett COUNCILLOR: EAST WARD garry.mallett@council.hcc.govt.nz Rob Pascoe COUNCILLOR: EAST WARD rob.pascoe@council.hcc.govt.nz Paula Southgate COUNCILLOR: EAST WARD paula.southgate@council.hcc.govt.nz Philip Yeung COUNCILLOR: EAST WARD philip.yeung@council.hcc.govt.nz Siggi Henry COUNCILLOR: WEST WARD siggi.henry@council.hcc.govt.nz Dave Macpherson COUNCILLOR - WEST WARD dave.macpherson@council.hcc.govt.nz Angela O'Leary COUNCILLOR - WEST WARD angela.oleary@council.hcc.govt.nz Geoff Taylor COUNCILLOR: WEST WARD geoff.taylor@council.hcc.govt.nz Leo Tooman COUNCILLOR - WEST WARD leo.tooman@council.hcc.govt.nz Richard Briggs CHIEF EXECUTIVE richard.briggs@hcc.govt.nz HAMILTON CITY COUNCIL S ANNUAL PLAN 5

8 OUR FINANCIAL STRATEGY Our Year Plan includes a financial strategy around rates increases, balancing the books and debt. The financial strategy: holds total rates rises at 3.8 per cent for existing ratepayers each year for 10 years balances the books from 2016 onwards reduces our debt-to-revenue ratio to 200 per cent or below by In other words, this caps debt at $2 for every $1 collected in rates and user charges. This keeps within our financial strategy limits, which are outlined over the next few pages. However, you will see that there are funding challenges in future years and the Council has options to address those challenges. We have started work on our next 10-Year Plan, which is where the important decisions will be made around our future spending and revenue, including a review of our financial strategy. Being our biggest budgeting process it will need the input of Hamiltonians, so there will be opportunities to contribute throughout. RATES In the Year Plan, we renewed our financial strategy to hold rates rises at 3.8 per cent per year for 10 years. The Council decided to stick with this increase for. For the average residential property, this will mean an extra $84 in rates. Total rates increase for existing ratepayers Rates increases to existing rate payers % What s in our 10-Year Plan for 3.8% 3.8% What s in our Annual Plan for 0 3.8% 3.8% 4.2%* 3.8% 3.8% 3.8% 3.4%** 3.8% 3.8% 3.8% 3.8% 3.8% 3.8% 2012/ / / / / / / / / / /25 History Forecast Year Plan Forecast * Hamilton Gardens targeted rate introduced in 2014/15 ** Hamilton Gardens targeted rate removed in 2018/19 6 HAMILTON CITY COUNCIL S ANNUAL PLAN

9 BALANCING THE BOOKS Our Year Plan forecast a $2m balancing the books surplus for. Changes to our operating budget mean we are now forecasting to break even. The main reasons for this shift are: changes in our assumptions relating to interest costs, inflation and revenue significant increases in depreciation costs additional staff costs the cost of the CBD free parking trial increased costs in other areas such as Civil Defence, seismic and building condition assessments and information technology licences. Our balancing the books measure is a way of assessing the Council s operating performance. There are other ways to measure this, including the Government s balanced budget measure, which we also report against. The main difference between the two measures is the Government s balanced budget measure excludes revenue from development contributions and Hamilton City Council s measure includes it. This makes the Government s measure more conservative. Using the Council s measure, we balance the books in to $0. Using the Government s measure, we are projecting a $11m deficit in and wouldn t balance the budget until 2022/23. As part of developing our next 10-Year Plan, we will be reviewing our financial strategy, including how we measure our operating performance. Balancing the Books Hamilton City Council Measure $M / / / / / / / / / / /25 -$8m $1m $5m $8m $2m $0m -$6m $2m $8m $9m $10m $14m $18m History Forecast Year Plan Forecast Balanced Budget Government Measure $M Balancing the books (Hamilton City Council measure) Balanced budget (Government measure) What s in our 10-Year Plan for What s in our Annual Plan for $2m surplus Break even $7m deficit $11m deficit / / / / / / / / / / /25 -$24m -$12m -$13m -$26m -$9m -$11m -$15m -$8m -$2m -$1m $0m $3m $6m History Forecast Year Plan Forecast HAMILTON CITY COUNCIL S ANNUAL PLAN 7

10 DEBT Our Year Plan forecast the Council s debt at $435m in and a debt-to-revenue ratio of 203 per cent. Changes to our capital budget and revenue mean that we are now forecasting $434m of debt in and a debt to revenue ratio of 205 per cent. The change in our projected debt position is due to bringing forward projects planned for future years, additional funding for projects (including $1.25m for River Plan projects) and re-phasing some projects to future years. The debt-to-revenue ratio is now projected to be 205%, due to reduced revenue. This is largely revenue from pensioner housing, which has been removed due to the sale of these assets; and reduced parking revenue due to the introduction of the free parking trial in the CBD. What s in our 10-Year Plan for Total overall debt $435m $434m Debt-to-revenue ratio 203% 205% What s in our Annual Plan for Total Overall Debt $M / / / / / / / / / /24 $396m $383m $367m $348m $391m $434m $436m $448m $462m $468m $483m $475m History Forecast Year Plan Forecast Debt-to-revenue Ratio % /25 $455m % 208% 187% 170% 192% 205% 200% 197% 196% 191% 188% 177% 163% 2012/ / / / / / / / / / /25 History Forecast Year Plan Forecast 8 HAMILTON CITY COUNCIL S ANNUAL PLAN

11 FINANCIAL STATEMENTS STATEMENT OF COMPREHENSIVE REVENUE AND EXPENSE FOR THE YEAR ENDED 30 JUNE 2018 Revenue Note $000 $000 $000 Rates 2 152, , ,765 Revenue from activities 3 43,525 44,621 39,867 Subsidies and grants 4 5,127 5,301 5,692 Development and financial contributions 5 9,027 9,141 11,141 Capital revenue 5 6,528 6,769 6,702 Interest revenue 8 2,000 2,000 2,000 Other revenue 9,766 9,857 9,770 Total revenue 228, , ,937 Expenses Personnel costs 68,855 70,800 73,884 Depreciation and amortisation 7 58,352 60,086 63,870 Finance costs 8 23,543 24,650 21,819 Other expenses 67,497 71,572 67,783 Total expenses 218, , ,356 Operating surplus/(deficit) 10,500 10,187 8,581 Gains Losses Surplus/(deficit) before tax 10,500 10,187 8,581 Other comprehensive revenue and expense Items that could be reclassified to surplus/(deficit) Items that will not be reclassified to surplus/(deficit) Gain on property, plant and equipment revaluations 22,753 52,857 52,857 Total other comprehensive revenue and expense 22,753 52,857 52,857 Total comprehensive revenue and expense 33,253 63,044 61,438 BALANCING THE BOOKS MEASURE FOR THE YEAR ENDED 30 JUNE 2018 Note $000 $000 $000 Surplus/(deficit) before tax 10,500 10,187 8,581 Adjustments for balancing the books measure Gains Losses Vested assets (included in Other revenue) 8,549 8,618 8,581 Ring Road subsidy (included in Capital revenue) Total adjustments 8,549 8,618 8,581 Balancing the books surplus/(deficit) 1,951 1,569 - STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 Note $000 $000 $000 Balance at 1 July 2,983,007 3,016,260 3,179,121 Total comprehensive revenue and expense for the period 33,253 63,044 61,438 Balance at 30 June 3,016,260 3,079,304 3,240,559 Total comprehensive revenue and expense attributable to: Hamilton City Council 33,253 63,044 61,438 Total comprehensive revenue and expense 33,253 63,044 61,438 HAMILTON CITY COUNCIL S ANNUAL PLAN 9

12 STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 Note 10 HAMILTON CITY COUNCIL S ANNUAL PLAN $000 $000 $000 ASSETS Current assets Cash and cash equivalents 45,000 45,000 35,000 Receivables 17,614 18,142 19,142 Prepayments 1,663 1,663 1,563 Inventory Other financial assets Derivative financial instruments Non-current assets held for sale Total current assets 64,521 65,056 55,856 Non-current assets Property, plant and equipment 3,338,252 3,420,301 3,608,249 Intangible assets 20,520 19,196 19,067 Investment property 24,308 24,308 19,420 Investment in associates 10 7,430 7,430 7,430 Other financial assets 9 8,280 8,280 27,426 Investment in subsidiaries 11 10,150 10,150 8,422 Derivative financial instruments Total non-current assets 3,408,940 3,489,665 3,690,014 Total assets 3,473,461 3,554,721 3,745,870 LIABILITIES Current liabilities Employee entitlements 5,053 5,094 5,994 Payables and deferred revenue 15,017 16,078 25,470 Provisions 1, ,781 Borrowings 12 81,217 84,443 65,300 Derivative financial instruments Total current liabilities 102, ,439 98,545 Non-current liabilities Employee entitlements Provisions 8,072 8,059 12,180 Borrowings , , ,700 Derivative financial instruments ,000 Total non-current liabilities 354, , ,766 Total liabilities 457, , ,311 Net assets 3,016,260 3,079,304 3,240,559 Equity Accumulated funds 1,620,209 1,630,844 1,639,564 Other reserves 1,355,264 1,408,120 1,558,540 Restricted and Council created reserves 40,787 40,340 42,455 Total equity attributable to Hamilton City Council 3,016,260 3,079,304 3,240,559 Total equity 3,016,260 3,079,304 3,240,559 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018 A $000 $000 $000 CASH FLOWS FROM OPERATING ACTIVITIES Cash was provided from: Rates revenue 152, , ,765 Fees, rents and charges 43,525 44,621 39,867 Government operating subsidies and grants 5,127 5,301 5,692 Government capital subsidies and grants 4,771 4,964 4,905 Other capital contributions 10,784 10,946 12,938 Interest received 2,000 2,000 2,000 Dividends received Sundry revenue 1,068 1,094 1,089 Total 220, , ,356 Cash was applied to: Payments to employees 68,855 70,800 73,884 Payments to suppliers 65,475 69,513 67,783 Interest paid 23,543 24,650 21,819 Net GST paid 1,900 1,900 (657) Total 159, , ,829 Net cash flow from operating activities 60,420 61,814 64,527 CASH FLOWS FROM INVESTING ACTIVITIES Cash was provided from: Proceeds from sale of property, plant and equipment Total Cash was applied to: Purchase of property, plant and equipment 72,572 79,336 89,884 Total 72,572 79,336 89,884 Net cash flow from investing activities (72,435) (79,191) (89,884) CASH FLOWS FROM FINANCING ACTIVITIES Cash was provided from: Loans raised 67, , ,782 Total 67, , ,782 Cash was applied to: Loan repayments 55,000 95,000 95,000 Finance lease repayments Total 55,425 95,425 95,425 Net cash flow from financing activities 12,015 17,377 15,357 Net increase/(decrease) in cash held - - (10,000) Opening cash and cash equivalents balance 45,000 45,000 45,000 Closing cash and cash equivalents balance 45,000 45,000 35,000

13 PROSPECTIVE NOTES TO THE FINANCIAL STATEMENTS NOTE 1: STATEMENT OF ACCOUNTING POLICIES REPORTING ENTITY Hamilton City Council is a territorial local authority governed by the Local Government Act The primary objective of the Council is to provide goods or services for community or social benefit rather than making a financial return. Accordingly, for the purposes of financial reporting, Hamilton City Council is a public benefit entity. These prospective financial statements are for Hamilton City Council (the Council) as a separate legal entity. Consolidated prospective financial statements comprising the Council and its subsidiaries and associates have not been prepared as the income and expenditure is not material to the long-term planning of Council. BASIS OF PREPARATION The Council authorised the prospective financial statements on 29 June The Council which is authorised to do so and, believes that the assumptions underlying these prospective financial statements are appropriate, approved the. Council and management of Hamilton City Council accept responsibility for the preparation of the prospective financial statements, including the appropriateness of the assumptions underlying the prospective financial statements and all other required disclosures. No actual results have been incorporated within the prospective financial statements. Council do not intend to update the prospective financial statements subsequent to presentation. Statement of compliance The prospective financial statements have been prepared in accordance with the requirements of the Local Government Act 2002, which includes the requirement to comply with New Zealand Generally Accepted Accounting Practice (NZ GAAP). The prospective financial statements have been prepared to comply with Public Benefit Entity Standards (PBE Standards) for a Tier 1 entity. The reporting period for these prospective financial statements is for the year ending 30 June The prospective financial statements are presented in New Zealand dollars, rounded to the nearest thousand ($000), unless otherwise stated. The accounting policies set out below have been applied consistently to all periods presented in these prospective financial statements. The purpose of the prospective financial information is to support the planning of Council. Measurement base The measurement basis applied is historical cost, modified by the revaluation of certain assets and liabilities as identified in this summary of significant accounting policies. The accrual basis of accounting has been used unless otherwise stated. For the assets and liabilities recorded at fair value, fair value is defined as the amount for which an item could be exchanged, or a liability settled, between knowledgeable and willing parties in an arm s-length transaction. For investment property, non-current assets classified as held for sale and items of property, plant and equipment which are revalued, the fair value is determined by reference to market value. The market value of a property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm s-length transaction. Amounts expected to be recovered or settled more than one year after the end of the reporting period are recognised at their present value. The present value of the estimated future cash flows is calculated using applicable inflation factors and a discount rate. The inflation rates used are obtained from the latest relevant BERL21 forecasts and the discount rate is the Council s forecast long-term cost of borrowing. Judgements and estimations The preparation of prospective financial statements using PBE standards requires the use of judgements, estimates and assumptions. Where material, information on the main assumptions is provided in the relevant accounting policy. The estimates and assumptions are based on historical experience as well as other factors that are believed to be reasonable under the circumstances. Subsequent actual results may differ from these estimates. The estimates and assumptions are reviewed on an ongoing basis and adjustments are made where necessary. Judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the relevant notes. Significant judgements and estimations include landfill post-closure costs, asset revaluations, impairments, certain fair value calculations and provisions. SIGNIFICANT ACCOUNTING POLICIES Revenue Revenue comprises rates, revenue from operating activities, investment revenue, gains, finance and other revenue and is measured at the fair value of consideration received or receivable. Revenue may be derived from either exchange or non-exchange transactions. HAMILTON CITY COUNCIL S ANNUAL PLAN 11

14 Exchange transactions Exchange transactions are transactions where the Council receives assets (primarily cash) or services, or has liabilities extinguished, and directly gives approximately equal value (primarily in the form of goods, services, or use of assets) to another entity in exchange. Non-exchange transactions Non-exchange transactions are transactions that are not exchange transactions. In a nonexchange transaction, the Council either receives value from or gives value to another entity without directly giving or receiving approximately equal value in exchange. An inflow of resources from a non-exchange transaction recognised as an asset is recognised as revenue, except to the extent that a liability is also recognised in respect of the same inflow. As the Council satisfies a present obligation recognised as a liability in respect of an inflow of resources from a non-exchange transaction recognised as an asset, it reduces the carrying amount of the liability recognised and recognises an amount of revenue equal to that reduction. Specific accounting policies for major categories of revenue are outlined below: Rates Rates are set annually by resolution from the Council and relate to a particular financial year. All ratepayers are invoiced within the financial year for which the rates have been set. Rates revenue is recognised in full as at the date when rate assessment notices are sent to the ratepayers. Rates revenue is classified as non-exchange except for metered water rates which are classed as exchange revenue. Operating activities The following categories (except where noted) are generally classified as transfers of nonexchange revenue. Grants, subsidies and reimbursements Grants, subsidies and reimbursements are initially recognised at their fair value where there is reasonable assurance that the payment will be received and all attaching conditions will be complied with. Grants and subsidies received in relation to the provision of services are recognised on a percentage of completion basis. Reimbursements (e.g. NZTA roading claim payments) are recognised upon entitlement, which is when conditions pertaining to eligible expenditure have been fulfilled. Development contributions Development contributions are recognised as revenue when the application for service connection or code of compliance or 224(c) is received. Fees and charges Revenue from the rendering of services (e.g. building consent fees) is recognised by reference to the stage of completion of the transaction, based on the actual service provided as a percentage of the total services to be provided. Under this method, revenue is recognised in the accounting periods in which the services are provided. Within rendering of services most activities are at least partially funded by rates and therefore classified as non-exchange. The exceptions are: Parking (excluding fines), Planning and guidance, Housing and Building Control which are 100 percent funded by users and classified as exchange revenue. Fines and penalties Revenue from fines and penalties (e.g. traffic and parking infringements, library overdue book fines, rates penalties) is recognised when infringement notices are issued or when the fines/penalties are otherwise imposed. Sale of goods The sale of goods is classified as exchange revenue. Sale of goods is recognised when products are sold to the customer and all risks and rewards of ownership have transferred to the customer. Other revenue Specific accounting policies for major categories of other revenue are outlined below: Dividends Dividends are classified as exchange revenue and are recognised when the Council s right to receive a payment has been established. Investment property lease rentals Lease rentals (net of any incentives given) are recognised on a straight line basis over the term of the lease. Donated, subsidised or vested assets Where a physical asset is acquired for nil or nominal consideration, the fair value of the asset received is recognised as non-exchange revenue when the control of the asset is transferred to the Council. Gains Gains include additional earnings on the disposal of property, plant and equipment and movements in the fair value of financial assets and liabilities. Gains are classified as exchange revenue. Finance revenue Interest Interest revenue is exchange revenue and recognised using the effective interest rate method. Donated services The Council benefits from the voluntary service of many Hamiltonians in the delivery of its activities and services. Due to the difficulty in determining the precise value of these donated services with sufficient reliability, donated services are not recognised in these financial statements. 12 HAMILTON CITY COUNCIL S ANNUAL PLAN

15 Expenses Specific accounting policies for major categories of expenditure are outlined below: Grants and sponsorship Expenditure is classified as a grant or sponsorship if it results in a transfer of resources (e.g. cash or physical assets) to another entity for compliance with certain conditions relating to the operating activities of that entity. It includes any expenditure arising from a funding arrangement with another entity that has been entered into to achieve the objectives of the Council. Grants and sponsorships are distinct from donations which are discretionary or charitable gifts. Where grants and sponsorships are discretionary until payment, the expense is recognised when the payment is made. Otherwise, the expense is recognised when the specified criteria have been fulfilled. Finance expense Interest expense is recognised using the effective interest rate method. All borrowing costs are expensed in the period in which they are incurred. Borrowing costs The Council has elected to defer the adoption of NZ IAS 23 Borrowing Costs (revised 2007) in accordance with its transitional provisions that are applicable to public benefit entities. Consequently, all borrowing costs are recognised as an expense in the period in which they are incurred. Goods and Services Tax (GST) All items in the prospective financial statements are stated exclusive of GST, with the exception of receivables and payables, which are stated as GST inclusive. Where GST is not recoverable as an input tax, it is recognised as part of the related asset or expense. Taxation Income tax expense on the surplus or deficit for the year comprises current and deferred tax. Current tax is the expected tax payable based on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, plus any adjustment to tax payable in respect of previous periods. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the assets and liabilities, and the unused tax losses using tax rates enacted or substantively enacted at the end of the reporting period. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which they can be utilised. Financial instruments Financial instruments include financial assets (loans and receivables and financial assets at fair value through other comprehensive revenue and expense), financial liabilities (payables and borrowings) and derivative financial instruments. Financial instruments are initially recognised on trade-date at their fair value plus transaction costs. Subsequent measurement of financial instruments depends on the classification determined by the Council. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Council has transferred substantially all of the risks and rewards of ownership. Financial instruments are classified into the categories outlined below based on the purpose for which they were acquired. The classification is determined at initial recognition and re-evaluated at the end of each reporting period. Financial assets Financial assets are classified as loans and receivables or financial assets at fair value through other comprehensive revenue and expense. Loans and receivables comprise cash and cash equivalents, trade and other receivables and loans and deposits. Cash and cash equivalents comprise cash balances and call deposits with maturity dates of three months or less. Trade and other receivables have fixed or determinable payments. They arise when the Council provides money, goods or services directly to a debtor, and has no intention of trading the receivable. Loans and deposits include loans to other entities (including subsidiaries and associates), and bank deposits with maturity dates of more than three months. Financial assets in this category are recognised initially at fair value plus transaction costs and subsequently measured at amortised cost using the effective interest rate method. Fair value is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date for assets of a similar maturity and credit risk. Trade and other receivables due in less than 12 months are recognised at their nominal value. A provision for impairment is recognised when there is objective evidence that the asset is impaired. As there are statutory remedies to recover unpaid rates, penalties and water meter charges, no provision has been made for impairment in respect of these receivables. Financial assets at fair value through other comprehensive revenue and expense relate to equity investments that are held by the Council for long-term strategic purposes and therefore are not intended to be sold. Financial assets at fair value through other comprehensive revenue and expense are initially recorded at fair value plus transaction costs. They are subsequently measured at fair value and changes, other than impairment losses, are recognised directly in a reserve within equity. On disposal, the cumulative fair value gain or loss previously recognised directly in other comprehensive revenue and expense is recognised within surplus or deficit. HAMILTON CITY COUNCIL S ANNUAL PLAN 13

16 Debtors and other receivables Debtors and other receivables are measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Impairment of a receivable is established when there is objective evidence that the Council will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, receivership or liquidations, and default in payments are considered indicators that the debt is impaired. The amount of the impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the surplus or deficit. When the receivable is uncollectable, it is written off against the allowance account for receivables. Overdue receivables that have been renegotiated are reclassified as current (that is, not past due). Inventory Inventories consumed in the provision of services (such as botanical supplies) are measured at the lower of cost and current replacement cost. Property, plant and equipment Property, plant and equipment consist of: Operational assets These include land, buildings (which includes cultural assets, community and leisure facilities), improvements, non-restricted parks and gardens, plant and equipment, vehicles, sports areas and library books. Zoo animals Zoo animals are held primarily for a social and recreational purpose. The capital cost consists of the actual expense incurred in acquiring the Zoo animals. Restricted assets These are parks and reserves owned by Council that cannot be disposed of because of legal or other restrictions and provide a benefit or service to the community. Heritage assets These are museum collections and library collections (New Zealand Room). Infrastructure assets These are the fixed utility systems owned by the Council. Each asset type includes all items that are required for the network to function. Property, plant and equipment are shown at cost or valuation, less accumulated depreciation and impairment losses. 14 HAMILTON CITY COUNCIL S ANNUAL PLAN Additions The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. Work in progress is recognised at cost less impairment and is not depreciated. In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition. Disposals Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are reported in the net surplus or deficit. When revalued assets are sold, the amounts included in asset revaluation reserves in respect of those assets are transferred to accumulated funds. Subsequent costs Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the Council and the cost of the item can be measured reliably. The costs of day-to-day servicing of property, plant, and equipment are recognised in the surplus or deficit as they are incurred. Revaluation Land and buildings (operational and restricted), heritage assets, and infrastructural assets (except land under roads) are revalued with sufficient regularity to ensure that their carrying amount does not differ materially from fair value and at least every three years. All other asset classes are carried at depreciated historical cost. The carrying values of revalued assets are assessed annually to ensure that they do not differ materially from the assets fair values. If there is a material difference, then the off-cycle asset classes are revalued. Revaluations of property, plant, and equipment are accounted for on a class-of-asset basis. The net revaluation results are credited or debited to other comprehensive income and are accumulated to an asset revaluation reserve in equity for that class of asset. Where this would result in a debit balance in the asset revaluation reserve, this balance is not recognised in other comprehensive income but is recognised in the surplus or deficit. Any subsequent increase on revaluation that reverses a previous decrease in value recognised in the surplus or deficit will be recognised first in the surplus or deficit up to the amount previously expensed, and then recognised in other comprehensive income. Depreciation Depreciation is provided on a straight-line basis at rates that will write off the cost (or valuation) of the assets to their estimated residual values over their useful lives.

17 The useful lives and associated depreciation rates of major classes of assets have been estimated as follows: Buildings - structure/fit out/services yrs 1%-10% Plant and vehicles 3-15 yrs 6.6%-33.3% Furniture, fittings and equipment 5-10 yrs 10%-20% Library books 8 yrs 7.1% Zoo animal (acquisition costs) 10 yrs 10% Improvements Parks & Gardens yrs 0.6% - 20% Roads and traffic network: Top surface (seal) 6-18 yrs 5.5% % Pavement (basecourse) yrs 2% - 4% Catchpits 70 yrs 2% Culverts yrs 1.25% - 1.6% Footpaths yrs 1.4% - 2% Kerbs and traffic islands 70 yrs 1.4% Signs 12 yrs 8.3% Street lights 25 yrs 4% Bridges 150 yrs 0.6% Traffic signals 15 yrs 6.6% Barriers yrs 2.5% - 4% Bus shelters and parking meters 4-10 yrs 10% - 25% Verge, embankment and retaining walls 60 yrs 1.6% Wastewater reticulation: Pipes yrs 1% - 1.6% Manholes 75 yrs 1.3% Treatment plant yrs 1% - 20% Bridges yrs 1% - 1.3% Pump stations yrs 1% - 6.6% Stormwater system: Pipes 100 yrs 1% Manholes, cesspits 100 yrs 1% Service connections and outlets yrs 1%-3.3% Water reticulation: Pipes yrs 1.25% - 1.6% Butterfly valves yrs 1.3% - 2% Treatment plant yrs 0.8% - 10% Meters yrs 1.3% - 5% Hydrants 50 yrs 2% Reservoirs yrs 1.25% - 3.3% Refuse Rubbish and Recycling yrs 1% - 10% The residual value and useful life of an asset is reviewed and adjusted if applicable at each financial year end. Heritage assets are not depreciated. Depreciation is not provided in these statements on the following assets: Land Formation costs associated with roading Investment properties Non-current asset held for resale Work in progress and assets under construction Investment properties Properties leased to third parties under operating leases are classified as investment property unless the property is held to meet service delivery objectives, rather than to earn rentals or for capital appreciation. These assets consist of investment properties owned by the Council, funded either from Corporate Funds, the Domain Endowment Fund or the Municipal Endowment Fund. Investment property is measured initially at its cost, including transaction costs. After initial recognition, all investment property is measured at fair value as determined annually by an independent valuer. Gains or losses arising from a change in the fair value of investment property are recognised in the surplus or deficit. Non-current assets held for sale Non-current assets held for sale are classified as held for sale if their carrying amount will be recovered principally through a sale transaction, not through use. Non-current assets held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment losses for write-downs of non-current assets held for sale are recognised in the surplus or deficit. Any increases in fair value (less costs to sell) are recognised up to the level of any impairment losses that have been previously recognised. Non-current assets (including those that are part of a disposal group) are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of a disposal group classified as held for sale continue to be recognised. Intangible assets Intangible assets comprise: Computer software licences are capitalised at historic cost and are amortised on a straight-line basis over their estimated useful lives (5 years). Costs associated with maintaining computer software are recognised as an expense when incurred. Resource consents which are not attributed to a specific asset are capitalised at historic cost and are amortised on a straight-line basis over their estimated useful lives (7 to 35 years). HAMILTON CITY COUNCIL S ANNUAL PLAN 15

18 Impairment of non-financial assets The carrying amount of the Council s assets, other than investment property and inventories are reviewed at each balance date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Council estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where the future economic benefits of an asset are not primarily dependant on the asset s ability to generate net cash flows, and where the Council would, if deprived of the asset, replace its remaining future economic benefits, value in use shall be determined as the depreciated replacement cost of the asset. Where the Council accounts for revaluations of property, plant and equipment on a class of asset basis, an impairment loss on a revalued asset is recognised directly against any revaluation reserve in respect of the same class of asset to the extent that the impairment loss does not exceed the amount in the revaluation reserve for that same class of asset. Where the Council accounts for revaluations of property, plant and equipment on a class of asset basis, a reversal of an impairment loss on a revalued asset is credited directly to the revaluation reserve. However, to the extent that an impairment loss on the same class of asset was previously recognised in the surplus or deficit, a reversal of that impairment loss is also recognised in the surplus or deficit. For assets not carried at a revalued amount, the total impairment loss is recognised in the surplus or deficit. Financial assets at fair value through surplus or deficit Financial assets at fair value through surplus or deficit include financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or it is part of a portfolio of identified financial instruments that are managed together and for which there is evidence of short-term profit-taking. Derivatives are also categorised as held for trading unless they are designated into a hedge accounting relationship for which hedge accounting is applied. Financial assets acquired principally for the purpose of selling in the short-term or part of a portfolio classified as held for trading are classified as a current asset. The current/non-current classification of derivatives is explained in the derivatives accounting policy below. After initial recognition, financial assets in this category are measured at their fair values with gains or losses on remeasurement recognised in the surplus or deficit. Fair value through other comprehensive income Financial assets at fair value through other comprehensive income are those that are designated into this category at initial recognition or are not classified in any of other categories above. They are included in non-current assets unless management intends to dispose of, or realise, the investment within 12 months of balance date. The Council includes in this category; Investments that it intends to hold long-term but which may be realised before maturity; and Shareholdings that it holds for strategic purposes. These investments are measured at their fair value, with gains and losses recognised in other comprehensive income, except for impairment losses, which are recognised in the surplus or deficit. On derecognition the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to the surplus or deficit. Impairment of financial assets Financial assets are assessed for objective evidence of impairment at each balance date. Impairment losses are recognised in the surplus or deficit. Loans and other receivables, and held-to-maturity investments Impairment is established when there is objective evidence that the Council will not be able to collect amounts due according to the original terms of the debt. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default payments are considered indicators that the asset is impaired. The amount of the impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. For debtors and other receivables, the carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the surplus or deficit. When the receivable is uncollectable, it is written-off against the allowance account. Overdue receivables that have been renegotiated are reclassified as current (that is, not past due). Impairment in term deposits, local authority stock, government stock bonds, general and community loans are recognised directly against the instruments carrying amount. Financial assets at fair value through surplus or deficit For equity investments, a significant or prolonged decline in the fair value of the investment below its cost is considered objective evidence of impairment. For debt instruments, significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default in payments are considered objective indicators that the asset is impaired. If impairment evidence exists for investments at fair value through the other comprehensive income, the cumulative loss (measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the surplus or deficit) recognised in other comprehensive income is reclassified from equity to the surplus or deficit. Equity instrument impairment losses recognised in the surplus or deficit are not reversed through the surplus or deficit. If in a subsequent period the fair value of a debt instrument increases and the increase can be 16 HAMILTON CITY COUNCIL S ANNUAL PLAN

19 objectively related to an event occurring after the impairment loss was recognised, the impairment loss is reversed in the surplus or deficit. Creditors and other payables Short-term creditors and other payables are recorded at their face value. Borrowings Borrowings are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Finance charges, premiums payable on settlement or redemption and direct costs are accounted for on an accrual basis to the surplus or deficit using the effective interest method and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Borrowings are classified as current liabilities unless the Council has an unconditional right to defer settlement of the liability for at least 12 months after balance date. EMPLOYEE ENTITLEMENTS Short-term employee entitlements Employee benefits expected to be settled within 12 months after the end of the period in which the employee renders the related service are measured based on accrued entitlements at current rates of pay. These include salaries and wages accrued up to balance date, annual leave earned to, but not yet taken at balance date, and sick leave. A liability for sick leave is recognised to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date; to the extent it will be used by staff to cover those future absences. The provision for retirement gratuities has been calculated on an actuarial basis bringing to account what is likely to be payable in the future in respect of service that employees have accumulated up until twelve months after balance date. Long-term employee entitlements Employee benefits that are due to be settled beyond 12 months after the end of the period in which the employee renders the related service, such as retirement gratuities, have been calculated on an actuarial basis. The calculations are based on: likely future entitlements accruing to staff, based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement, and contractual entitlement information; and the present value of the estimated future cash flows. Presentation of employee entitlements Sick leave, annual leave, and retirement gratuities expected to be settled within 12 months of balance date, are classified as a current liability. All other employee entitlements are classified as a non-current liability. SUPERANNUATION SCHEMES Defined contribution schemes Obligations for contributions to KiwiSaver are accounted for as defined contribution superannuation schemes and are recognised as an expense in the surplus or deficit when incurred. Derivative financial instruments The Council s activities expose it to the financial risks of changes in foreign exchange rates and interest rates. Council uses foreign exchange forward contracts and interest rate swaps to manage their foreign currency and interest rate exposure. Derivative financial instruments are recognised initially at fair value. The Council has elected not to hedge account for these derivative financial instruments. Changes in the fair value of the derivative financial instruments are recognised in the surplus/deficit. LEASES Leases consist of: Finance leases A finance lease is a lease that transfers to the lessee substantially all the risks and rewards incidental to ownership of an asset, whether or not title is eventually transferred. At the commencement of the lease term, Council recognises finance leases as assets and liabilities in the statement of financial position at the lower of the fair value of the leased item or the present value of the minimum lease payments. The finance charge is charged to the surplus or deficit over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. The amount recognised as an asset is depreciated over its useful life. If there is no certainty as to whether Council will obtain ownership at the end of the lease term, the asset is fully depreciated over the shorter of the lease term and its useful life. Operating leases An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset. Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term. HAMILTON CITY COUNCIL S ANNUAL PLAN 17

20 Provisions Council recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that expenditures will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense and is included in finance costs. Financial guarantee contracts A financial guarantee contract is a contract that requires the Council to make specified payments to reimburse the holder of the contract for loss it incurs because a specified debtor fails to make payment when due. Financial guarantee contracts are initially recognised at fair value, even if a payment under the guarantee is not considered probable. If a financial guarantee contract was issued in a stand-alone arms length transaction to an unrelated party, its fair value at inception is equal to the consideration received. When no consideration is received, a liability is recognised based on the probability that the Council will be required to reimburse a holder for a loss incurred discounted to the present value. The portion of the guarantee that remains unrecognised, prior to discounting to fair value is disclosed as a contingent liability. Financial guarantees are subsequently measured at the initial recognition amount less any amortisation. However, if it is probable that expenditure will be required to settle a guarantee, then the provision for the guarantee is measured at the present value of the future expenditure. Landfill post-closure costs The Council has legal obligations under resource consent to provide ongoing maintenance and monitoring services at several of its landfill sites. Provision for post-closure costs is recognised as a liability when the obligation for post-closure arises. The provision is measured based on the present value of future cash flows expected to be incurred, taking into account future events including legal requirements and known improvements in technology. The provision includes all costs associated with landfill postclosure. Amounts provided for landfill post-closure are capitalised to the landfill asset where they give rise to future economic benefits to be obtained. Components of the capitalised landfill asset are depreciated over their useful lives. The discount rate used is a rate that reflects current market assessments of the time value of money and the risks specific to the Council. All subsequent changes in the liability shall be recognised in the surplus/deficit and the periodic unwinding of the discount will also be recognised in the surplus/deficit as a finance cost as it occurs. Equity Equity is the community s interest in Council and is measured as the difference between total assets and total liabilities. Equity is disaggregated and classified into a number of reserves. The components of equity are: Accumulated funds Revaluation reserves Restricted reserves Council created reserves Accumulated funds comprise accumulated surpluses over the years. Revaluation reserves comprise accumulated revaluation increments/decrements. Restricted reserves are those funds subject to external restrictions accepted as binding by Council, which may not be revised by Council without reference to the Courts or a third party. Council created reserves are formally imposed designations of public equity that indicate Council s intention to use a certain level of resources for a special purpose. Prospective Statement of cash flows Cash and cash equivalents for the purposes of the cashflow statement comprises bank balances, cash on hand and short term deposits with a maturity of three months or less. Operating activities include cash received from all non-financial revenue sources of the Council and record the cash payments made for the supply of goods and services. Investing activities relate to the acquisition and disposal of assets and investment revenue. Financing activities relate to activities that change the equity and debt capital structure of the Council and financing cost. Public Benefit Entity Financial Reporting Standard 42 Prospective Financial Statements (PBE FRS 42) The Council has complied with PBE FRS 42 in the preparation of these draft prospective financial statements. In accordance with PBE FRS 42, the following information is provided: (i) Description of the nature of the entity s current operation and its principal activities The Council is a territorial local authority, as defined in the Local Government Act The Council s principal activities are outlined within this. (ii) Purpose for which the prospective financial statements are prepared It is a requirement of the Local Government Act 2002 to present prospective financial statements that span one year and include them within the. This provides an opportunity for ratepayers and residents to review the projected financial results and position of the Council. Prospective financial statements are revised annually to reflect updated assumptions and costs. (iii) Bases for assumptions, risks and uncertainties The financial information has been prepared on the basis of best estimate assumptions as the 18 HAMILTON CITY COUNCIL S ANNUAL PLAN

21 future events which the Council expects to take place. The Council has considered factors that may lead to a material difference between information in the prospective financial statements and actual results. These factors, and the assumptions made in relation to the sources of uncertainty and potential effect, are outlined within this. (iv) Cautionary note The financial information is prospective. Actual results are likely to vary from the information presented, and the variations may be material. (iv) Other disclosures These prospective financial statements were adopted as part of the for Hamilton City Council. The Council is responsible for the prospective financial statements presented, including the assumptions underlying prospective financial statements and all other disclosures. The is prospective and as such contains no actual operating results. NOTE 2: RATES REVENUE $000 $000 $000 General rates, rates penalties General rate 30,303 46,892 44,679 Rates penalties Less rates charges to Council properties (652) (676) (414) Less Rates remissions - Hardship (369) (386) (250) - Other (2,368) (3,184) (3,184) Targeted rates attributable to activities: - Transitional rate 110, , ,251 - Services category rates (water, refuse and sewerage) 975 1,020 1,020 - Access Hamilton rate 5,000 5,000 5,000 - Business improvement district rate Hamilton Gardens rate CBD Parking rate Metered water supply 7,953 8,146 8,111 Less metered water charges to Council properties - - (418) Total rates revenue 152, , ,765 NOTE 3: ACTIVITY REVENUE $000 $000 $000 Revenue by group of activity Arts and Culture 1,718 1,760 1,018 Community Support 2,458 2, Governance Economic Development 9,210 9,436 7,851 Parks and Green Spaces 3,104 3,196 2,536 Planning and Development 7,583 7,767 8,629 Recreation 4,790 5,103 4,279 Rubbish and Recycling Safety 2,185 2,239 2,163 Sewerage 5,400 5,598 4,226 Stormwater Transport 6,108 6,256 3,774 Water Supply Overheads/Support units 2,010 2,058 5,591 Less: Internal revenue (2,015) (2,098) (1,026) Total revenue from activities 43,525 44,621 39,867 Revenue from activities by type Adshel contribution Environment Waikato contribution (Project Watershed) Sale of goods 1,340 1,372 2,104 Fees and user charges 27,533 28,414 27,872 Infringements and fines 2,036 2,086 1,379 Rental income 6,206 6,357 3,849 Commission received Ticketing commission External recoveries 4,571 4,507 3,103 Donations Other income Total revenue by type 43,525 44,621 39,867 HAMILTON CITY COUNCIL S ANNUAL PLAN 19

22 NOTE 4: SUBSIDIES AND GRANTS $000 $000 $000 NZTA roading subsidy - operating 4,226 4,378 4,640 Government grants & subsidies Other grants Waste minimisation levy Total subsidies and grants 5,127 5,301 5,692 NOTE 5: CAPITAL REVENUE Development and financial contributions $000 $000 $000 Stormwater Transport 2,524 2,556 3,116 Sewerage 2,733 2,767 3,372 Water 1,820 1,843 2,246 Community infrastructure 1,473 1,492 1,818 Total development and financial contributions 9,027 9,141 11,141 Capital revenue NZTA roading subsidy - capital 4,771 4,964 4,905 Capital contributions - general 1,757 1,805 1,797 6,528 6,769 6,702 Total capital revenue 15,555 15,910 17,843 The NZTA capital roading subsidy was classified as subsidies and grants and capital contributions were classified as other revenue in the Year Plan. NOTE 6: OTHER REVENUE $000 $000 $000 Vested assets 8,549 8,618 8,581 Dividends Petrol tax income 1,068 1,094 1,089 Other sundry income Total other revenue 9,766 9,857 9,770 Revenue reclassified as exchange or non-exchange transactions Revenue from exchange transactions $000 $000 $000 Fees and user charges 27,877 28,767 28,197 Other revenue 9,543 9,544 8,530 Rental income 6,206 6,357 3,849 Subsidies and grants Targeted rates for water supply 7,953 8,146 7,693 Total revenue from exchange transactions 52,060 53,307 48,771 Revenue from non-exchange transactions Development and financial contributions 9,027 9,141 11,141 Subsidies and grants 9,417 9,772 10,095 Infringements and fines 2,036 2,086 1,379 Other revenue 2,837 2,911 2,898 Rates, excluding targeted rates for water supply 144, , ,072 Vested assets 8,549 8,618 8,581 Total revenue from non-exchange transactions 176, , ,166 Total revenue 228, , , HAMILTON CITY COUNCIL S ANNUAL PLAN

23 NOTE 7: DEPRECIATION AND AMORTISATION EXPENSE BY GROUP $000 $000 $000 Directly attributable depreciation and amortisation expense by group of activity Arts and Culture 2,641 2,744 3,683 Community Support 1,118 1, Governance Economic Development 5,284 5,715 5,478 Parks and Green Spaces 3,341 3,666 4,180 Planning and Development Recreation 1,641 1,715 1,660 Rubbish and Recycling Safety Sewerage 7,921 8,131 9,313 Stormwater 5,805 5,853 8,256 Transport 17,927 17,792 18,309 Water Supply 7,416 7,616 7,146 Total directly attributable depreciation and amortisation by group of activity 53,487 54,832 58,701 Depreciation and amortisation not directly related to group of activities 4,865 5,254 5,169 Total depreciation and amortisation expense 58,352 60,086 63,870 NOTE 9: OTHER FINANCIAL ASSETS Non-current portion Loans and receivables $000 $000 $000 Term deposits with maturities greater than 1 year 3,303 3,303 5,040 Community loans ,975 Unlisted shares NZ Local Government Insurance Co Limited NZ Local Government Funding Agency Limited 1,866 1,866 1,866 Waikato Innovation Park Limited 2,506 2,506 2,079 Local Authority Shared Services Limited Total non-current portion 8,280 8,280 27,426 Total other financial assets 8,280 8,280 27,426 NOTE 10: INVESTMENT IN ASSOCIATES $000 $000 $000 Associates Waikato Regional Airport Limited 7,430 7,430 7,430 Total investment in associates 7,430 7,430 7,430 NOTE 8: INTEREST REVENUE AND FINANCE COSTS $000 $000 $000 Interest revenue Interest income 2,000 2,000 2,000 Finance costs Interest on borrowings 23,468 24,575 21,744 Interest on finance leases Total finance costs 23,543 24,650 21,819 Net finance costs 21,543 22,650 19,819 HAMILTON CITY COUNCIL S ANNUAL PLAN 21

24 NOTE 11: INVESTMENT IN SUBSIDIARIES Subsidiaries $000 $000 $000 Hamilton Properties Limited Innovation Waikato Limited 10,149 10,149 8,421 Total investment in subsidiaries 10,150 10,150 8,422 NOTE 12: BORROWINGS $000 $000 $000 Current portion Secured loans 80,917 84,143 65,000 Finance leases Total current portion 81,217 84,443 65,300 Non-current portion Secured loans 345, , ,850 Unsecured loans - - 1,200 Finance leases Total non-current portion 345, , ,700 Total external debt 427, , ,000 Adjustments required to determine overall debt: External debt 427, , ,000 Less cash held and cash equivalents (45,000) (45,000) (35,000) Plus reserves 36,288 35,841 39,583 Total overall debt 418, , ,583 DEBT SERVICING PERFORMANCE INDICATORS Financial ratios Liquidity ratio (target >110%) >110% >110% >110% Total overall debt / Total revenue (target 200% by 2020) 203% 203% 205% Net interest on external debt / Total revenue (target <20% 11% 11% 9% Total overall debt as a multiple of cashflow (target <15) NOTE 13: RESERVES Restricted reserves $000 $000 $000 Cemetery plot maintenance in perpetuity reserve 1,541 1,541 1,800 Dame Hilda Ross children's library memorial fund Domain Endowment fund 2,144 2,144 7,518 Municipal Endowment fund 27,927 27,927 28,639 Roman Catholic Schools Library fund Waikato Art Gallery Endowment reserve Total restricted reserves 31,624 31,624 37,967 Council created reserves Bus shelter (adshel) reserve Hamilton Gardens reserve Housing upgrade reserve 3,101 3,101 - Project Watershed operating reserve Rotokauri land sale reserve 2,167 2,167 - Reserves contribution fund 2,332 2,332 2,872 Waste minimisation reserve Total council created reserves 9,163 8,716 4,488 Total restricted and council created reserves 40,787 40,340 42,455 THE FOLLOWING RESERVES WERE CLOSED IN 2015/16 Council created reserves - Rotokauri land sale reserve - Housing upgrade reserve Restricted reserves - Dame Hilda Ross children s library memorial fund - Roman Catholic Schools Library fund 22 HAMILTON CITY COUNCIL S ANNUAL PLAN

25 NOTE 13: RESERVES Activities to which the reserve relates Balance July 2017 Transfers into reserve Transfers out of Balance June 2018 Restricted reserves Cemetery plot maintenance in perpetuity reserve - to maintain and provide for improvements to the cemeteries. Cemeteries and Crematorium 1, ,800 Domain endowment fund reserve - to provide a capital endowment fund for domain land for investment in property. Rental income and interest earned from domain endowment land is used to fund parks and reserves operating costs. Parks and Green Spaces and Stormwater 7, ,518 Municipal Endowment Fund - to provide a capital fund for Crown endowment land vested in the council for investment in property. Rental income and interest earned from the land and property may be used for council purposes to offset rates. Strategic property investments 28, ,639 Waikato Art Gallery Endowment reserve - to provide funds for the acquisition of works of art for the Waikato Museum of Art and History. Arts promotion Total restricted reserves 37, ,967 Council created reserves Bus shelter reserve - to manage the income generated from advertising in bus shelters to provide, maintain and enhance passenger infrastructure. Travel demand management (271) 81 Hamilton Gardens reserve - to provide funds for the development of Hamilton Gardens. Funds are being sourced from a target rate over a four year period starting 2014/15. Hamilton Gardens 911 2,265 (2,744) 432 Project Watershed operating reserve - to fund works relating to river flood protection and erosion control (Project Watershed). Waikato Regional Council is the funding agency and Hamilton City Council carries out agreed works within the city boundary. Parks and Green Spaces and Stormwater (298) 571 Reserves contribution fund - this fund receives contributions from Council policy on levying sub-dividers and developers for provision of reserves. Payment may be in kind (land) or a pro rata levy on the value of the development. The balance of the fund is used for the purchase of land for reserves (or the development of same). Reserve contributions were levied on sub-divisions approved prior to the advent of development contributions for reserves which came into effect on 1 July Strategic property investments 2, ,872 Waste minimisation reserve - To encourage a reduction in the amount of waste generated and disposed of in New Zealand, and to lessen the environmental harm of waste. The reserve was created in 2009 as a result of the Waste Minimisation Act Funding is distributed to local authorities by the Ministry of Environment and expenditure includes grants to others, waste minimisation initiative operating expenses and recycling contract. Waste minimisation (548) 532 Total council created reserves 5,481 2,868 (3,861) 4,488 Total restricted and council created reserves 43,448 2,868 (3,861) 42,455 HAMILTON CITY COUNCIL S ANNUAL PLAN 23

26 NOTE 14: CAPITAL EXPENDITURE Notes $000 $000 $000 CAPITAL EXPENDITURE INCURRED BY ACTIVITIES Arts and Culture 2,245 3,541 3,484 Community Services Democracy Services Economic Development 1,912 2,083 2,314 Parks and Green Spaces 2 5,841 5,326 8,979 Planning and Development Recreation 1,214 1,801 1,133 Rubbish and Recycling Safety Sewerage 3 15,590 23,072 23,790 Stormwater 1,550 2,714 3,038 Transportation 4 20,286 17,643 20,693 Water Supply 17,994 18,334 18,850 Corporate Services 5 5,272 4,144 7,143 Total capital expenditure 72,572 79,336 89,884 CAPITAL EXPENDITURE NOTES EXPLAIN CHANGES FROM 10 YEAR PLAN TO ANNUAL PLAN 1. Budget not required due to the sale of the Pensioner Housing stock. 2. Includes work at the Crematorium, the River Plan and the Rototuna Sports Park. 3. For providing increased capacity in the Rototuna wastewater network. 4. Includes an increase for the roading network in Rotokauri. 5. Increase required to meet fleet and software replacements. 24 HAMILTON CITY COUNCIL S ANNUAL PLAN

27 CAPITAL PROJECTS The following pages set out what we will spend on major projects in. The projects are required to renew existing assets, improve the Council s levels of service or to respond to the needs of a growing city. KEY R LOS = Renewals = Levels of service G = Growth ARTS AND CULTURE Libraries Type 10-Year Plan $000 $000 CE Library collection purchases R 1,104 1,091 CE Library asset renewal R CE Library building asset renewal programme R Museum 1,223 1,305 CE Museum asset renewal R CE ArtsPost earthquake strengthening R 1,316 1,301 CE Public art support fund R CE Museum activity building renewals R Hamilton City theatres 1,557 1,729 CE Founders Theatre plant and equipment R CE Technical services equipment renewals R CE Founders Theatre building renewals R Total Arts and Culture 3,541 3,484 HAMILTON CITY COUNCIL S ANNUAL PLAN 25

28 COMMUNITY SERVICES Housing services Type 10-Year Plan $000 $000 CE Pensioner housing renewals R Total Community Support ECONOMIC DEVELOPMENT Claudelands and stadia CE Business administration plant and equipment R CE Claudelands plant and equipment R CE Seddon Park plant and equipment R CE FMG Stadium Waikato plant and equipment R CE Turf services plant and equipment R CE Seddon Park property renewals R CE FMG Stadium Waikato property renewals R CE Stadia building renewals R CE Claudelands building renewals R 9 9 1,923 2,231 Strategic property CE Strategic property renewals R 8 8 CE Tenancy inducement renewals R Total Economic Development 2,083 2, HAMILTON CITY COUNCIL S ANNUAL PLAN

29 PARKS AND GREEN SPACES Cemeteries and crematorium Type 10-Year Plan $000 $000 CE Building renewals cemeteries R CE Renewal of crematorium assets R CE Hamilton Park east and west cemeteries renewals R 8 8 CE Hamilton Park cemetery, burial and ash lawn extension G Hamilton Gardens CE Hamilton Gardens renewals R CE Hamilton Gardens building renewals R CE Proposed development programme G 2,786 2,744 Parks 2,992 2,950 CE Toilet and changing room renewals R CE Building renewals parks and open spaces R 48 0 CE Parks and open spaces assets and playgrounds renewals R 1,245 1,231 CE Land purchase future reserves G CE Playground development programme G CE Victoria on the River Development LOS CE River Plan LOS 527 1,250 Sports Parks 2,162 4,515 CE Sports area renewals R CE Rototuna Park option 1 G Total Parks and Green Spaces 5,326 8,979 HAMILTON CITY COUNCIL S ANNUAL PLAN 27

30 RECREATION Aquatic Facilities Type 10-Year Plan $000 $000 CE Aquatic facilities building renewals R 1, CE Waterworld operational asset renewals R CE Gallagher Aquatic Centre operational asset renewal R Hamilton Zoo 1, CE Zoo animal enclosure renewals R CE Zoo building renewals R CE Zoo animal replacement R CE Zoo safety improvements R Total Recreation 1,801 1,133 SAFETY CE CCTV renewals R Total Safety RUBBISH AND RECYCLING CE Replacement of closed landfill assets R CE Replacement of RTS & HOC assets R 7 7 CE Closed landfill management LOS Total Rubbish and Recycling HAMILTON CITY COUNCIL S ANNUAL PLAN

31 SEWERAGE Type 10-Year Plan $000 $000 CE Replacement of wastewater pump stations R CE Replacement of wastewater assets R 4,406 4,354 CE Increase capacity of wastewater pump stations LOS CE Wastewater pipe upgrade - growth G CE Increase capacity of wastewater network - Rototuna G CE Wastewater network upgrades to allow development G CE Increase capacity of network in Rotokauri stage 1 G 256 1,154 CE Increase capacity of network throughout the city G 3,202 3,178 CE Increase capacity of network (far east interceptor) G 0 3,124 CE Increase capacity of network (bulk storage) G 3, CE Wastewater master plan R CE Replacement of wastewater treatment plant assets G 1,901 1,879 CE Upgrade wastewater treatment plant systems LOS CE Upgrade wastewater treatment plant (Pukete 3) G 6,056 6,500 CE Wastewater treatment plant compliance LOS CE Wastewater customer connections to the network G Total Sewerage 23,072 23,790 STORMWATER CE Replacement of Stormwater assets R CE Rototuna Stormwater infrastructure G CE Rotokauri Stormwater infrastructure stage 1 G CE Peacocke stormwater infrastructure stage 1 G CE Stormwater pipe upgrade - growth G CE Existing network improvements in new areas G CE Comprehensive stormwater consent implementation LOS CE Stormwater customer connections to the network G CE Integrated catchment management plan LOS Total Stormwater 2,714 3,038 HAMILTON CITY COUNCIL S ANNUAL PLAN 29

32 TRANSPORT Parking management Type 10-Year Plan $000 $000 CE Replacement of parking enforcement equipment R 5 5 CE Parking building renewal R Transportation network CE Replacement of footpath R 2,248 1,790 CE Replacement of street furniture R CE Replacement of drainage (kerb and channel) R 1,294 1,001 CE Replacement of road base R 2,093 1,950 CE Road resurfacing R 4,561 4,946 CE Replacement of bridges and culverts R CE Replacement of retaining walls and structures R CE Replacement of environmental controls R 11 5 CE Replacement of lighting R CE Replacement of traffic equipment R CE Replacement of street signs R CE Building and property renewals R CE Minor improvements to transport network LOS CE Bus stop infrastructure LOS CE Network upgrades to allow new development G CE Roading upgrades and development in Peacocke stage 1 G CE Roading upgrades and development in Peacocke stage 2 G CE Roading upgrades and development in Rotokauri stage 1 G 772 3,281 CE Roading upgrades and development in Rototuna G 3,091 3,504 CE Roading upgrades and development in Ruakura G 0 0 CE Integrated transport initiatives LOS ,633 20,488 Total Transportation 17,643 20, HAMILTON CITY COUNCIL S ANNUAL PLAN

33 WATER SUPPLY Type 10-Year Plan $000 $000 CE Replacement of watermains R 3,440 3,400 CE Replacement of water meters, valves and hydrants R CE Upgrade or build new watermains in Rototuna G 2, CE Water pipe upgrade - growth G CE Upgrade/build new watermains in Rotokauri stage 1 G 105 7,474 CE Upgrade/build new watermains in Peacocke stage 1 G CE Water network upgrades to allow new development G CE Water demand management - network water loss LOS CE Water demand management - Pukete reservoir zone LOS CE Water demand management - Dinsdale reservoir zone LOS CE Replacement of treatment plant and reservoir assets R CE Water treatment plant compliance - minor upgrades LOS CE Rototuna reservoir and associated bulk mains G CE Water demand management - Hillcrest reservoir zone LOS 0 1,520 CE Upgrade water treatment plant G 8,426 2,750 CE Tools of trade renewals R CE Water customer connections G Total Water Supply 18,334 18,850 HAMILTON CITY COUNCIL S ANNUAL PLAN 31

34 CORPORATE SERVICES Corporate Buildings Type 10-Year Plan $000 $000 CE Renewals program R 1,104 1,044 Information Services 1,104 1,044 CE Network and infrastructure R CE Core business applications R CE Minor applications R CE Mobility and eservices LOS CE Lease funding of equipment R CE Authority replacement LOS Performance 2,102 3,919 CE Replacement of fleet vehicles R 938 2,080 Customer services 938 2,080 CE Customer Services Projects LOS Total Corporate Services 4,144 7,143 TOTAL COUNCIL 79,336 89, HAMILTON CITY COUNCIL S ANNUAL PLAN

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